When it comes to cloud computing services, AWS is the industry leader by a fair margin. Even in the sphere of beneficial discounts for their customers that promote economic scaling, AWS is doing its part as well. With numerous other discount offers, the top most advantageous plans for cloud cost optimization include the AWS savings plan and Reserved Instances. Despite the differences, they both have been used interchangeably very frequently. Thus, for a clear picture, this blog outlines the differences between the both. Let’s get started.

What is the primary difference between AWS Reserved Instances and Savings Plan?

Both Savings Plans and Reserved Instances have a few varieties of type, payment terms, and term length. The primary difference between AWS Reserved Instances and Savings Plan is that Reserved Instances are based on a commitment to use a specific instance type at a fixed price for a specified period, while Savings Plans are based on a commitment to spend a specific dollar amount per hour on any EC2 instance type over a specific period.

AWS Reserved Instances explained

Instances are virtual environments that you can use on an hourly basis to deploy your applications and programs. So, the “Reserved Instances Program” offered by AWS is a discount pricing program that allows you to save up to 75% on On-Demand Instances when committing for a term of 1 or 3 years. With Reserved Instances (RIs), you can “reserve” a defined amount of computing power (instances) through advance payments and commitments. Reserved Instances have 2 offering types; Convertible Reserved Instances and Standard Reserved Instances which have different stipulations around modifying and selling.

  Standard Convertible
Modifications Allowed: Zone, Scope, and Size Allowed: Zone, Scope, and Size
Exchangeable No Yes, can be exchanged for different convertible RIs
Marketplace Can be bought or sold (after 30 days) on AWS Marketplace Cannot be bought or sold on AWS Marketplace

AWS savings plan explained

Amazon Web Services launched AWS Savings Plans, a dedicated spend discount program, in November 2019. Savings Plans is a flexible pricing model that can help you reduce your bill by up to 72% compared to On-Demand prices, in exchange for a one or three year hourly spend commitment. AWS offers three types of Savings Plans: Compute Savings Plans, EC2 Instance Savings Plans, and Amazon SageMaker Savings Plans.

Depending on the plan you’re subscribing to and the length of your commitment, the AWS savings plan pricing changes. Amazon provides terms of 1 and 3 years with No Upfront, Partial Upfront, and All Upfront, similar to RIs. In essence, the reductions depend on your level of commitment but can reach 72%. An AWS savings plan calculator can be a major help here.

AWS savings plan vs reserved instances: Comparing the details

So, we have got the basics cleared. But, how do the reserved instances and the savings plan differ in the technical aspects? Here are the technical distinctions between the two counterparts:

  • Commitment focus Reserved Instances are built on the commitment to utilize an instance at a specific price over a specific term. Whereas, Savings Plans are built on the commitment to spend a specified dollar amount per hour over a defined period.
  • Flexibility Offered Standard and Convertible Reserved Instances are allocated to a specific location/region, instance type, os version, and tenant. Only instances meeting the parameters will utilize the RI. Whereas, Savings Plans apply more broadly. EC2 Savings plans will cover anything in the same family and region as the commitment. Compute savings plans will cover any EC2 instance usage as well as Fargate and Lambda.
  • Repurposing Cloud Savings You are able to repurpose your Cloud compute savings plans and move workloads between instance types irrespective of the operating system or tenancy. In contrast, you might employ different instance types with Standard Reserved Instances for your stable infrastructure.
  • Selling in the AWS Marketplace The AWS Reserved Marketplace allows you to resell extra RIs or buy more Standard RIs via a 12% service charge. In order to increase your commitment without resetting your contract, you can also exchange your convertible RIs. Whereas, savings Plans cannot be bought or sold through AWS Marketplace.
  • The discounts offered Reserved Instances have greater discounts, though they are more stringent with how they apply. Savings plans are less restrictive with how they apply, but they save you less.

AWS Savings Plan & AWS Reserved Instances: Which one is better?

You’ll discover that AWS Savings Plans give the same discounts as Reserved Instances and have one major advantage over them: the flexibility to make infrastructure modifications while still receiving the same discounts. However, unlike Standard RIs, there is no option to sell unused or unwanted Savings Plans on the AWS Marketplace. This means you are financially responsible for the commitment for the entire term, even if it is underutilized. Savings Plans are more convenient, but come with a higher risk and a slightly lower discount. They make things easier, for sure, for infrastructure that is undecided or subject to change.

RIs, when executed correctly, can end up saving you more money in the long run and with less financial risk. The general hesitancy of using Standard RIs is constantly monitoring and adjusting them as infrastructure needs change. It’s a lot to manage, and often leads to a lack of moving forward.

How Does nOps Help Users To Efficiently utilize their Unused AWS Commitments?

Regardless of the plan selected, fully optimal cloud spending isn’t always possible, and customers may experience decision paralysis, especially in the case of large-scale, complicated deployments that call for careful planning. It is essential that you carefully consider your commitment before making one, as any consumption above the commitment will be charged at standard On-Demand rates. Otherwise, you risk committing to using more than you need. By over-provisioning or under-utilizing the cases, you run the risk of swiftly losing any potential savings. At nOps, we process about a billion dollars of cloud spend on our platform and to this date 70% of the customer challenges are related to unused commitments. That includes all types of savings plans, reserved instances and Spot as well. This is exactly what nOps can help you with!

  • nOps leverages the Cost & Usage Report (CUR) provided by customers to extract information about their unused commitments. This helps in identifying saving opportunities.
  • Based on the plans, utilization, eligibility criteria and saving opportunities, nOps provides recommendations to utilize unused commitments. Users can leverage the saving recommendations with a single-click confirmation.
  • nOps goes beyond recommendations by automating the process. By leveraging AI capabilities, we predict the amount of unused commitments a client will have in the upcoming update period of their Cost and Usage Report (CUR), which typically occurs every 14 to 48 hours. These predictions are continuously updated as we receive new information about the client’s usage patterns.

nOps Karpenter Solution helps you intelligently optimize your unused commitments. Your team focuses on innovation, while nOps runs optimization on auto-pilot to help you track, analyze, and optimize accordingly! Let us help you save! Sign up for nOps or Book a demo call today.

AWS Savings Plans are used to save money on your Amazon Web Services (AWS) bill by committing to use a certain amount of computing power over a one- or three-year period.
There are 3 types of AWS Savings Plans: Compute Savings Plans, EC2 Instance Savings Plans, and SageMaker Savings Plans.

No, AWS Savings Plan cannot be canceled once they are purchased.  You may delete queued Savings Plans prior to their execution. 

The benefits of AWS Reserved Instances include cost savings, capacity guarantees, and greater control over resources.
Reserved Instances work by allowing you to reserve a specific amount of computing capacity for a one- or three-year period, which is charged at a discounted rate compared to on-demand pricing.
The drawbacks of Reserved Instances include limited flexibility, potential overprovisioning or underutilization, and the need to commit to a specific instance type and region.
The amount that Reserved Instances can save varies based on usage, instance type, region, tenancy, and Operating System selected.
AWS Reserved Instances are charged upfront for the duration of the reservation, and the discounted rate is applied to the usage of the reserved capacity over the reservation period. No Upfront RIs will bill the day they are executed, then on the 1st of each month thereafter until the term ends.